Exchange companies to withhold tax on payment to MTOs

Exchange companies to withhold tax on payment to MTOs

ISLAMABAD: Exchange companies have been brought under the ambit of withholding tax and now they are required to deduct tax on payment to international money transfer operators (MTOs).

The change has been proposed through budget 2022/2023, which was presented on June 10, 2022.

Through Finance Bill, 2022 amendments suggested to Section 152 of the Income Tax Ordinance, 2001.

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According to amendments, new sub-sections have been proposed:

“(1DC) Every exchange company licensed by the State Bank of Pakistan shall deduct tax at the time of making payment of service charges or commission or fee, by whatever name called, to the global money transfer operators, international money transfer operators or such other persons engaged in international money transfers or cross-border remittances for facilitating outward remittances, at the rates given in Division IV, Part I of the First Schedule:

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Provided that where such person retains service charges or commission or fee, by whatever name called from the amount payable to the exchange company on any account, the exchange company shall be deemed to have paid the service charges or commission or fee, by whatever name called and the exchange company shall collect the tax accordingly.

(1DD) Every banking company while making payment to card network company or payment gateway or any other person, of any transaction fee or licensing fee or service charges or commission or fee by whatever name called or interbank financial telecommunication services, shall deduct tax at the rates given in Division IV, Part I of the First Schedule:

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Provided that where card network company or payment gateway or any other person retains money in relation to aforementioned services from the amount payable to the banking company on any account, the banking company shall be deemed to have paid the amount and the banking company shall collect the tax accordingly.”;

According to Income Tax Ordinance, 2001 updated up to June 30, 2021, the rate of tax imposed under section 6 on payments to non-residents shall be 15 per cent of the gross amount of the royalty or fee for technical services and 5 per cent of the gross amount of the fee for offshore digital services.

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